Commercial Paper


Commercial Paper Meaning:
In deposit terminology, the term Commercial Paper refers to an unregulated promissory note of short duration that is usually not secured by assets. Commercial Paper generally has a fixed maturity that might typically range from one to 270 days in length.

Commercial Paper Example:
For example, Commercial Paper will often be issued by companies that need to borrow a substantial amount of money to meet their short term funding needs. In this sense, Commercial Paper acts as an I.O.U. from the company to those willing to invest in its debt. With respect to the risks involved in investing in Commercial Paper, the level of risk will tend to depend on the corporation issuing it, although risks do include the potential loss of principal and any accrued interest in case the company defaults. Returns available from Commercial Paper investments tend to be similar to money market rates, but since Commercial Paper is usually issued at a discount to face value, its returns usually come in the form of capital appreciation.